Today, you are borrowing money from your local bank. The loan is to be repaid in one lump sum payment of $14,000 one year from now. How much money are you borrowing today if the APR is 9.6 percent?

Question

Quizplus · Accepted Answer

We can use the formula:

FV = PV(1+r)^n

where FV = future value (amount to be repaid), PV = present value (amount borrowed), r = annual interest rate in decimal form, and n = number of years.

Plugging in the values, we get:

$14,000 = PV(1+0.096)^1

Simplifying, we get:

PV = $12,773.72

Therefore, the best choice is C.

Today, You Are Borrowing Money from Your Local Bank